Republic of the Philippines

SUPREME COURT
Manila

EN BANC

[G.R. No. L-22814. August 28, 1968.]

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC., plaintiff-

appellant, vs. CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL

BOARD, THE CITY MAYOR and THE CITY TREASURER, all of
the CITY OF BUTUAN, defendants-appellees.

Sabido, Sabido & Associates for plaintiff-appellant.

The City Attorney of Butuan City for defendants-appellees.

SYLLABUS
1. TAXATION; MUNICIPAL TAXATION; ORDINANCE 110 OF THE CITY
OF BUTUAN, INVALID. Ordinance 110 of the City of Butuan, as
amended by Ordinance No. 122, imposes a tax of P0.10 per case of 24
bottles of soft drinks or carbonated drinks only upon "any agent and/or

consignee

of

any

person,

association,

partnership,

company

or

corporation engaged in selling . . . soft drinks or carbonated drinks."

Viewed from this angle, the tax partakes of the nature of an import duty
which is beyond defendant's authority to impose by express provision of
law. For, as a consequence of such measure, merchants engaged in the
sale thereof are not subject to the tax unless they are agents and/or
consignees of another dealer, who, in the very nature of things, must be
one engaged in business outside the City. Besides, the tax would not be
applicable to such agent and/or consignee, if less than 1,000 cases of
soft drinks are consigned or shipped to him every month. When we
consider, also that the tax "shall be based and computed from the cargo
manifest or bill of lading . . . showing the number of cases" not sold
but received by the taxpayer, the intention to limit the application of the
ordinance to soft drinks brought into the city from outside thereof
becomes apparent.
2. ID.;

ID.;

ID.;

SAID

ORDINANCE

VIOLATES

THE

RULE

ON

UNIFORMITY OF TAXATION. Even if Ordinance 110 of the City of

Butuan were regarded as a tax on the sale of the beverages, it would still
be invalid, as discriminatory, and hence, violative of the uniformity
required by the Constitution and the law therefor, since only sales by
"agents or consignees" of outside dealers would be subject to the tax.
Sales by local dealers, not acting for or on behalf of other merchants,
regardless of the volume of their sales, and even if the same exceeded
those made by said agents or consignees of producers or merchants
established outside the City of Butuan, would be exempt from the
disputed tax.
3. ID.; ID.; ID.; CONDITIONS FOR VALID CLASSIFICATION NOT MET BY
QUESTIONED ORDINANCE. The uniformity essential to the valid
exercise of the power of taxation does not require identity or equality
under all circumstances, or negate the authority to classify the objects of
taxation. The classification made in the exercise of this authority, to be

valid, must, however, be reasonable and this requirement is not deemed

satisfied unless: (1) it is based upon substantial distinctions which make
real differences; (2) these are germane to the purpose of the legislation or
ordinance; (3) the classification applies, not only to present conditions,
but, also, to future conditions substantially identical to those of the
present; and (4) the classification applies equally to all those who belong
to the same class. These conditions are not fully met by the ordinance in
question. Indeed, if its purpose were merely to levy a burden upon the
sale of soft drinks or carbonated beverages, there is no reason why sales
thereof by dealers other than agents are consignees of producers or
merchants established outside the City of Butuan should be exempt from
the tax.
DECISION
CONCEPCION, C.J :
p

Direct appeal to this Court, from a decision of the Court of First

Instance of Agusan, dismissing plaintiff's complaint, with costs.
Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic
corporation with offices and principal place of business in Quezon City.
The defendants are the City of Butuan, its City Mayor, the members of its
municipal board and its City Treasurer. Plaintiff seeks to recover the
sums paid by it to the City of Butuan hereinafter referred to as the
City and collected by the latter, pursuant to its Municipal Ordinance
No. 110, as amended by Municipal Ordinance No. 122, both series of
1960, which plaintiff assails as null and void, and to prevent the
enforcement thereof. Both parties submitted the case for decision in the
lower court upon a stipulation to the effect:
"1. That plaintiff's warehouse in the City of Butuan serves as a
storage for its products the "Pepsi-Cola" soft drinks for sale to
customers in the City of Butuan and all the municipalities in the

Province of Agusan. These "Pepsi-Cola" soft drinks are bottled in

Cebu City and shipped to the Butuan City warehouse of plaintiff
for distribution and sale in the City of Butuan and all
municipalities of Agusan.
"2. That on August 16, 1960, the City of Butuan enacted
Ordinance No. 110 which was subsequently amended by
Ordinance No. 122 and effective November 28, 1960. A copy of
Ordinance No. 110, Series of 1960 and Ordinance No. 122 are
incorporated herein as Exhibits "A" and "B", respectively.
"3. That Ordinance No. 110 as amended, imposes a tax on any
person, association, etc., of P0.10 per case of 24 bottles of PepsiCola and the plaintiff paid under protest the amount of
P4,926.63 from August 16 to December 31, 1960 and the amount
of P9,250.40 from January 1 to July 30, 1961.
"4. That the plaintiff filed the foregoing complaint for the recovery
of the total amount of P14,177.03 paid under protest and those
that it may later on pay until the termination of this case on the
ground that Ordinance No. 110 as amended of the City of Butuan
is illegal, that the tax imposed is excessive and that it is
unconstitutional.
"5. That pursuant to Ordinance No. 110 as amended, the City
Treasurer

of

Butuan

City,

has

prepared

form

to

be

accomplished by the plaintiff for the computation of the tax. A

cop(y) of the form is enclosed herewith as Exhibit "C".
"6. That the Profit and Loss Statement of the plaintiff for the
period from January 1, 1961 to July 30, 1961 of its warehouse in
Butuan City is incorporated herein as Exhibits "D" to "D-1" to "D5". In this Profit and Loss Statement, the defendants claim that
the plaintiff is not entitled to a depreciation of P3,052.63 but only
P1,202.55 in which case the profit of plaintiff will be increased
from P1,254.44 to P3,104.52. The plaintiff differs only on the

claim of depreciation which the company claims to be P3,052.62.

This is in accordance with the findings of the representative of
the undersigned City Attorney who verified the records of the
plaintiff.
"7. That beginning November 21, 1960, the price of Pepsi-Cola
per case of 24 bottles was increased to P1.92 which price is
uniform throughout the Philippines. Said increase was made due
to the increase in the production cost of its manufacture.
"8. That the parties reserve the right to submit arguments on the
constitutionality and illegality of Ordinance No. 110, as amended
of the City of Butuan in their respective memoranda.
"xxx xxx xxx"

Section 1 of said Ordinance No. 110, as amended, states what products

are "liquors", within the purview thereof. Section 2 provides for the
payment by "any agent and/or consignee" of any dealer "engaged in
selling liquors, imported or local, in the City," of taxes at specified rates.
Section 3 prescribes a tax of P0.10 per 24 bottles of the soft drinks and
carbonated beverages therein named, and "all other soft drinks or
carbonated drinks." Section 3-A, defines the meaning of the term
"consignee or agent" for purposes of the ordinance. Section 4 provides
that said taxes "shall be paid at the end of every calendar month."
Pursuant to Section 5, the taxes "shall be based and computed from the
cargo manifest or bill of lading or any other record showing the number
of cases of soft drinks, liquors or all other soft drinks or carbonated
drinks received within the month." Sections 6, 7 and 8 specify the
surcharge to be added for failure to pay the taxes within the period
prescribed and the penalties imposable for "deliberate and willful refusal
to pay the tax mentioned in Sections 2 and 3" or for failure "to furnish
the office of the City Treasurer a copy of the bill of lading or cargo
manifest or record of soft drinks, liquors or carbonated drinks for sale in

the City." Section 9 makes the ordinance applicable to soft drinks,

liquors or carbonated drinks "received outside" but "sold within" the City.
Section 10 of the ordinance provides that the revenue derived therefrom
"shall be allotted as follows: 40% for Roads and Bridges Fund; 40% for
the General Fund and 20% for the School Fund."
Plaintiff maintains that the disputed ordinance is null and void because:
(1) it partakes of the nature of an import tax; (2) it amounts to double
taxation; (3) it is excessive, oppressive and confiscatory; (4) it is highly
unjust and discriminatory; and (5) Section 2 of Republic Act No. 2264,
upon the authority of which it was enacted, is an unconstitutional
delegation of legislative powers.
The second and last objections are manifestly devoid of merit. Indeed
independently of whether or not the tax in question, when considered in
relation to the sales tax prescribed by Acts of Congress, amounts to
double taxation, on which we need not and do not express any opinion
double taxation, in general, is not forbidden by our fundamental law. We
have not adopted, as part thereof, the injunction against double taxation
found in the Constitution of the United States and of some States of the
Union.

Then,

again,

the

general

principle

against

delegation

of

legislative powers, in consequence of the theory of separation of

powers

is subject to one well-established exception, namely: legislative

powers may be delegated to local governments to which said theory

does not apply
The

third

in respect of matters of local concern.

objection

is,

likewise,

untenable.

The

tax

of

"P0.10

per case of 24 bottles" of soft drinks or carbonated drinks in the

production and sale of which plaintiff is engaged or less than P0.0042
per bottle, is manifestly too small to be excessive, oppressive, or
confiscatory.

The first and the fourth objections merit, however, serious consideration.
In this connection, it is noteworthy that the tax prescribed in Section 3 of
Ordinance No. 110, as originally approved, was imposed upon dealers
"engaged in selling" soft drinks or carbonated drinks. Thus, it would
seem that the intent was then to levy a tax upon the sale of said
merchandise. As amended by Ordinance No. 122, the tax is, however,
imposedonly upon

"any

agent

and/or

consignee

of

any

person,

association, partnership, company or corporation engaged in selling . . .

soft drinks or carbonated drinks." And, pursuant to section 3-A, which
was inserted by said Ordinance No. 122:
". . . Definition of the Term Consignee or Agent. For purposes
of this Ordinance, a consignee or agent shall mean any person,
association, partnership, company or corporation who acts in the
place of another by authority from him or one entrusted with the
business of another or to whom is consigned or shipped no less
than 1,000 cases of hard liquors or soft drinks every month
for resale, either retail or wholesale."

As a consequence, merchants engaged in the sale of soft drinks or

carbonated drinks, are not subject to the tax, unless they are agents
and/or consignees of another dealer, who, in the very nature of things,
must be one engaged in business outside the City. Besides, the tax
would notbe applicable to such agent and/or consignee, if less than
1,000 cases of soft drinks are consigned or shipped to him every month.
When we consider, also, that the tax "shall be based and computed from
the cargo manifest or bill of lading . . . showing the number of cases"
not sold but "received" by the taxpayer, the intention to limit the
application of the ordinance to soft drinks and carbonated drinks
brought into the City from outside thereof becomes apparent. Viewed
from this angle, the tax partakes of the nature of an import duty, which
is beyond defendant's authority to impose by express provision of law. 4

Even, however, if the burden in question were regarded as a tax on the

sale of said beverages, it would still be invalid, as discriminatory, and
hence, violative of the uniformity required by the Constitution and the
law therefor, since only sales by "agents or consignees" of outsidedealers
would be subject to the tax. Sales by local dealers, not acting for or on
behalf of other merchants, regardless of the volume of their sales,
and even if the same exceeded those made by said agents or consignees
of producers or merchants established outside the City of Butuan, would
be exempt from the disputed tax.
It is true that the uniformity essential to the valid exercise of the power
of taxation does not require identity or equality under all circumstances,
or negate the authority to classify the objects of taxation.

The

classification made in the exercise of this authority, to be valid, must,

however, be reasonable

and this requirement is not deemed satisfied

unless: (1) it is based upon substantial distinctions which make real

differences; (2) these are germane to the purpose of the legislation or
ordinance; (3) the classification applies, not only to present conditions,
but, also, to future conditions substantially identical to those of the
present; and (4) the classification applies equally to all those who belong
to the same class. 7
These conditions are not fully met by the ordinance in question.

Indeed,

if its purpose were merely to levy a burden upon the sale of soft drinks or
carbonated beverages, there is no reason why sales thereof by
dealers other than agents or consignees of producers or merchants
established outside the City of Butuan should be exempt from the tax.

WHEREFORE, the decision appealed from is hereby reversed, and

another one shall be entered annulling Ordinance No. 110, as amended
by Ordinance 122, and sentencing the City of Butuan to refund to

plaintiff herein the amounts collected from and paid under protest by the
latter, with interest thereon at the legal rate from the date of the
promulgation of this decision, in addition to the costs, and defendants
herein are, accordingly, restrained and prohibited permanently from
enforcing said Ordinance, as amended. It is so ordered.

Concepcion, C . J ., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,

Castro, Angeles and Fernando, JJ ., concur.